Tesla (TSLA) has inked a nickel-supply agreement with mining magnate BHP Group, according to a Bloomberg report. As per the deal, BHP’s Western Australian operations, Nickel West, will supply nickel to Tesla. The automaker will work closely with BHP to stabilize and improve the battery supply chain.
Nickel, a crucial building block for lithium-ion batteries, is inching towards a supply crunch as the auto industry races towards electric vehicle (EV) manufacturing. The metal is preferred over cobalt as it enhances the power of batteries at a lower cost.
The CEO of Tesla, Elon Musk, had earlier expressed that inefficiencies in sustainable sourcing of Nickel were jeopardizing the future of nickel supply.
The deal is expected to safeguard the company from nickel supply shortages. Interestingly, Tesla has already partnered with miners like Glencore to secure its supply of commodities required for the production of EV batteries. (See Tesla stock chart on TipRanks)
Two days ago, Morgan Stanley analyst Adam Jonas reiterated a Buy rating on the stock with a price target of $900 (37.3% upside potential).
Jonas expects the value of Tesla’s recurring software revenue to increase in the future, and surpass the value of its hardware business. He anticipates the company to attract the coverage of tech/platform analysts with the possible deployment of more services. Jonas also believes this transition may lead to re-rating of the shares over time.
Consensus among analysts is a Hold based on 10 Buys, 6 Holds and 7 Sells. The average Tesla price target of $658.27 implies 0.5% upside potential.